Indonesia VAT Guide 2026

Overview — VAT System in Indonesia (PPN)

Indonesia's VAT (PPN) is governed by Law No. 42/2009 as amended by the Harmonisation of Tax Regulations Law (UU HPP, 2022). The standard rate was raised from 10% to 11% on 1 April 2022 and is legislated to increase to 12% by 2025/2026. VAT applies to the supply of most goods and services by taxable entrepreneurs (PKP, Pengusaha Kena Pajak). The system features credit for input VAT, electronic invoicing (e-Faktur), and a separate luxury goods tax (PPnBM) on high-end products.

Standard Rate — 11% (Increasing to 12%)

The standard PPN rate is 11% for most goods and services. Under the UU HPP, the rate will increase to 12% once certain economic conditions are met, with the government authorised to adjust the rate by regulation between 5% and 15%. For 2026, the standard rate remains in transition. The rate applies to the taxable base (Dasar Pengenaan Pajak, DPP), which is typically the selling price or the agreed value for services. VAT-inclusive pricing is common for B2C transactions, while B2B transactions typically quote prices excluding VAT.

Zero-Rated and Exempt Supplies

Zero-rated (0%): Exports of goods and certain services, including export of tangible goods, export of intangible goods (royalties, software), and export of services (subject to conditions). Zero-rated suppliers can recover input VAT.

Exempt (dibebaskan): The following are exempt from PPN (no VAT charged, but input VAT recovery is generally not available):

• Financial and insurance services
• Religious, educational, and healthcare services
• Public transport services
• Rental of residential property
• Basic foodstuffs (rice, corn, cassava, soybeans, salt, meat, eggs, milk)
• Electricity (up to certain thresholds)
• Water supply services

Luxury Goods Tax (PPnBM — Pajak Penjualan atas Barang Mewah)

In addition to standard PPN, the sale of luxury goods is subject to PPnBM at rates ranging from 10% to 200% (typically 20%–75% for most luxury items). PPnBM is a single-stage tax levied at the manufacturer/importer level and is not creditable. Goods subject to PPnBM include luxury vehicles (sedans, SUVs with large engines), private aircraft, yachts, luxury homes (above Rp 30 billion), and high-end jewellery. The rates vary by the degree of luxury and environmental impact.

VAT Registration Threshold

A business must register as a PKP (Pengusaha Kena Pajak) once its annual turnover exceeds Rp 4.8 billion (approximately USD 300,000). Businesses below this threshold are classified as non-PKP and are not required to charge or collect VAT. However, non-PKP businesses may voluntarily register as PKP, which allows them to recover input VAT on their business purchases. Foreign businesses providing digital services to Indonesian consumers must register as PKP regardless of turnover under the PMSE (Pajak Pertambahan Nilai Perdagangan Melalui Sistem Elektronik) rules.

E-Invoicing System (e-Faktur and e-Nofa)

Indonesia has a mandatory e-invoicing system for VAT. All PKP must issue invoices through the e-Faktur application, which generates a unique QR code and invoice number. Key features:

• e-Nofa: Electronic Notification of Taxable Invoice — PKP must request a series of invoice numbers electronically from DGT before issuing invoices
• e-Faktur: The official DGT application for creating, reporting, and uploading VAT invoices
• Invoices must be uploaded to DGT within 30 days of issuance
• Penalties for late uploading can result in the denial of input VAT credit
• The system integrates with the taxpayer's annual VAT return (SPT PPN)

VAT Filing and Payment

VAT returns (SPT PPN) are filed monthly by all PKP. The filing deadline is the end of the following month (e.g., January VAT is due by end of February). VAT can be paid at any authorised bank or through the DJP Online payment system. Overpaid VAT (more input than output) can be refunded or carried forward. The DGT processes refunds within 1–12 months depending on the taxpayer's compliance status.

FAQs

When will VAT increase to 12%?

The UU HPP legislates an increase to 12%, to take effect no later than 2025. As of 2026, the rate may have transitioned. The government has flexibility to set the exact timing based on economic conditions.

Do foreign digital companies pay Indonesian VAT?

Yes, foreign digital companies providing services to Indonesian consumers (streaming, software, gaming, e-commerce) must register as PKP PMSE and charge 11% PPN. Major global tech companies including Google, Netflix, Spotify, Amazon, and Microsoft have registered.

Can a small business voluntarily register for VAT to claim input credits?

Yes, businesses below the Rp 4.8 billion threshold may voluntarily register as PKP. This allows them to issue VAT invoices and claim input VAT credits. This is beneficial for start-ups with significant capital expenditures.

Disclaimer

This guide provides general information about Indonesian VAT (PPN) for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Indonesian tax advisor (konsultan pajak) or the DGT directly for advice specific to your situation. InvestmentKit does not provide tax advice.